Tom Keya On How Fintech Is Bringing Impact Investing Into The Light

While impact investing can no longer be considered niche, it’s not yet mainstream either. There needs to be some kind of catalyst to facilitate its shift into the main investment arena, and it could well be Fintech. Here’s why.

Tom Keya on How fintech is bringing impact investing into the light

Impact investing is no longer a niche interest

Impact investment is garnering more interest all the time. According to June 2020’s Annual Impact Investor Survey from the Global Impact Investing Network (GIIN), 300 impact investors collectively funded relevant assets to the tune of $404 billion. It’s hardly hidden in the shadows with that amount of funding.

The sector is growing all the time in both maturity and depth. Diversity remains a key theme for impact investing, according to GIIN’s analysis. Furthermore, we can recognise that measurement and management of impact funds have improved; there is a long way to go in refining this burgeoning sector.

So, despite all of this interest and a wider acceptance of impact investment as a way of making money and supporting sustainable assets, much more must be done to break through the barriers standing in its path for mainstream adoption. And there is plenty of reason to think that Fintech start-ups could be the answer to bridging this gap for impact investing.

Sustainable investing faces challenges and barriers to the mainstream

While impact investment is already far greater than the niche enterprise, it started as it faces many challenges and problems. From suspected greenwashing to the difficulties of sustaining trust and transparency, there are numerous reasons for investors to hold back from entering this market sector.

But fintechs are beginning to offer the kinds of innovative solutions that could push impact investing over this hump. For example, we’re seeing an increased impact on investment platforms that provide simpler ways to attract clients and investors.

And this increase is significant, as demonstrated by Dealroom’s registration of 14 impact investment tech businesses in the B2C sector, which have collectively raised £49.6 million.

Not every impact investment platform will go the distance, of course. This is a common trend among fintech start-ups that hop on a new way of working. Some survive and go on to lead the market, while others collapse early on. However, it demonstrates that tremendous opportunities are available for fintech start-ups to disrupt impact investing and craft new ways for the sector to grow.

Fintechs will increasingly attract investors and clients through their growing interest in impact investing and by using purpose-designed apps dedicated to investing and saving.

Of course, investors all want their decisions to go towards a truly sustainable initiative and one that will make them a decent return. How then do these sustainable investment apps and platforms work for the customer?

Impact investing is now attracting the mobile generation

Investors who are new to sustainable investing are generally concerned about trust. How do they know they can trust the platform or app with their investment decision and that the investment is reaching the cause they want to support?

Naturally, investors will be hugely interested in the trustworthiness of the platform they choose. They will expect to see complete transparency and accountability throughout. They will want to ensure that the fintech developer or start-up behind the platform is also ethically sound.

Developers must take all of this on board and be sure to make their platforms fully accountable. Successful examples of tech platforms that have done just that already exist can be seen with the likes of Clim8.

Clim8 is an impact investing app that was first launched in March 2021. It has raised £10 million in backing – including £2 million from Channel 4 Ventures and is simple to use. It allows investors to make positive changes by choosing investments that focus on providing access to clean water, the circular economy, clean technology and energy and smart mobility, among others.

Another success story includes Cooler Future, an investment platform that boasts the tagline ‘Invest sustainably, Earn rewards’. Cooler Future has raised a total of £1.2 million in funding from a group of angel investors and venture capitalist firm Lifeline Ventures.  

Sustainable investing is the future for investors everywhere

We can see then that fintechs are already coming up with solutions to expand the impact investment market and offer more options to existing investors. Crucially, however, these platforms also provide a way into this sector for brand new investors.

For example, according to sustainable investment platform Tickr, since it launched in 2018, up to 90% of its clients are newcomers to investing. From this, we can extrapolate that the impact investment options and sustainability options are drawing people in. Investors increasingly want to make a tangible difference in a world under threat from climate change and socio-political events.

Because impact investing is now transitioning into the mobile generation, it will continue to grow exponentially during the next few years. Investors will become aware of how simple the process is through a platform or app, which will further increase enthusiasm for sustainable investing.

Technological innovation – particularly fintech – is predicated based on taking something that is popular but inaccessible and making it easy to access and use. This will eventually go even further, and impact investing will absorb investing as a whole – there will be no differentiator between the two.

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